Emerging Stocks Fall From 4-Week High Before ECB Meeting

By Jason Webb and Sridhar Natarajan -
Aug 2, 2012

Emerging-market stocks fell from a
four-week high after European Central Bank President Mario Draghi didn’t announce any immediate steps to stem the region’s
crisis, disappointing investors who expected stronger measures.

The MSCI Emerging Markets Index (MXEF) retreated for the first
time in six days, dropping 1 percent to 944.94. Brazil’s Bovespa
stock index slid, pushed down by homebuilder MRV Engenharia &
Participacoes SA and Lojas Renner SA, the country’s biggest
publicly-traded clothing retailer. Samsung Electronics Co. (005930),
which gets more than a third of its sales from Europe and
America, slid the most in three weeks.

Draghi, speaking to reporters in Frankfurt, signaled the
bank will join with governments to buy sovereign bonds without
listing definitive measures to bolster growth. Last week, Draghi
had pledged to do “whatever it takes” to preserve the euro.
The 21 countries in the MSCI emerging market index (VXEEM) send about 30
percent of their exports to the European Union on average, data
compiled by the World Trade Organization show.

“Had he not made those comments last week, then this would
have been taken positively,” Lars Christensen, the chief
emerging-markets analyst at Danske Bank in Copenhagen, said by
phone. “He has, to a very large extent, confused the markets.”

Chinese Developers

The Bovespa fell 1.4 percent in Sao Paulo, with Lojas
Renner dropping 4.4 percent, the most since April 10. MRV
Engenharia & Participacoes lost 5.8 percent, falling for a third
day. The company was added yesterday to a Brazilian list of
companies whose workers operate in slave-like conditions.

The swaps gauge typically rises as investor confidence
deteriorates and falls as it improves. Credit swaps pay the
buyer face value if a borrower fails to meet its obligations,
less the value of the defaulted debt. A basis point equals
$1,000 annually on a contract protecting $10 million of debt.